Supreme Court New South Wales Medium Neutral Citation: Aspinall v Aqua Sports Pty Ltd [2018] NSWSC 706 Hearing dates: 11 May 2018 Date of orders: 11 May 2018 Decision date: 18 May 2018 Jurisdiction: Equity Before: Ward CJ in Eq Decision: (1) Order pursuant to s 70 of the Trustee Act 1925 (NSW) (Trustee Act) that: (a) Blair Pleash of Level 40, 2 Park Street, Sydney in the State of New South Wales, chartered accountant and registered liquidator; and (b) Joanne Freeman, of Level 40, 2 Park Street, Sydney in the State of New South Wales, chartered accountant and registered liquidator (collectively "the New Trustees") be appointed trustees of the trust known as the "Aspinall Trust", the terms of which are contained in a deed of trust dated 19 June 1997 and as amended by a deed poll dated 21 October 2010 (Trust), in substitution for Aqua Sports Pty Ltd (ACN 078 971 945). (2) Order pursuant to s 71 of the Trustee Act that all of the property held subject to the Trust be vested in the New Trustees. (3) Direct that, subject to any orders that may be made in the Family Court of Australia in proceedings No. SYC 3079/2016, the New Trustees not take any step to cease or cause the cessation of the operation of the swim school business presently carried on by the first defendant or to terminate the employment of the second defendant or any other current employee of the swim school business without: (a) the written consent of each of the plaintiff and second to fifth defendants or (b) in accordance with an order of the Family Court of Australia. (4) Balance of the summons be otherwise dismissed. (5) Order that the plaintiff's costs of these proceedings be paid out of the property held subject to the trust on the ordinary basis. Catchwords: EQUITY – Trusts and trustees – Court's supervision of trustees – Appointment and removal of trustees – Where trustee company deadlocked – Order for payment of plaintiff's costs out of the trust estate on the ordinary basis CIVIL PROCEDURE – Cross-vesting – Application to transfer proceedings from Supreme Court to Family Court of Australia pursuant to s 5(1)(b)(ii) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) – Application refused Legislation Cited: Civil Procedure Act 2005 (NSW), s 56 Corporations Act 2001 (Cth), s 197 Family Law Act 1975 (Cth), s 79 Family Law Rules 2004 (Cth), r 5.01 Jurisdiction of Courts (Cross Vesting) Act 1987 (NSW), s 5(1), s 5(9) Trustee Act 1925 (NSW), ss 70, 71 Cases Cited: Application of Uncle's Joint Pty Ltd [2014] NSWSC 321 Austec Wagga Wagga Pty Limited v Rarebreed Wagga Pty Limited [2012] NSWSC 343 Benlair Pty Ltd v Terrigal Grosvenor Lodge Pty Ltd [2006] NSWSC 339 Fencott v Muller (1983) 152 CLR 570; [1983] HCA 12 Giacobbe v Giacobbe [2012] VSC 285 Khamo v XL Cleaning Services Pty Ltd [2004] NSWSC 1134 Letterstedt v Broers (1884) 9 App Cas 371 Miller v Cameron (1936) 54 CLR 572; [1936] HCA 13 Murray Morgan Investments v Capma Pty Ltd [2016] NSWSC 264 Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 403 Re Wakim; ex parte McNally (1999) 198 CLR 511; [1999] HCA 27 Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261; [1983] HCA 36 Stein v Sybmore [2006] NSWSC 1004 Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440 Warby v Warby [2001] FamCA 1469; (2001) 166 FLR 319 Category: Principal judgment Parties: Alfred James Kenneth Aspinall (Plaintiff) Aqua Sports Pty Limited (First Defendant) Linda Anne Jenkins (Second Defendant) Annabelle Jane Aspinall (Third Defendant) Belinda Jo Aspinall (Fourth Defendant) James Raymond Aspinall (Defendant) Representation: Counsel: D Barlin (Plaintiff) G Johnston (First Defendant) D Thackeray (Solicitor) (Third to Fifth Defendants) Solicitors: Neville and Hourn (Plaintiff) Gells Lawyers (Second Defendant) Thackeray Legal (Third, Fourth and Fifth Defendants) File Number(s): 2018/00125362 Publication restriction: Nil Judgment 1. HER HONOUR: This matter came before me in the duty list on 11 May 2018 on the application of the plaintiff (Mr Alfred James Kenneth Aspinall), by summons filed in court on 20 April 2018, seeking an order pursuant to s 70 of the Trustee Act 1925 (NSW) (Trustee Act) appointing new trustees of the trust known as the "Aspinall Trust" (the Trust) in substitution for the existing trustee of the Trust, that being the first defendant (Aqua Sports Pty Ltd) (to which I will refer as Aqua Sports), in circumstances where the administration of the Trust is essentially deadlocked. A consequential order pursuant to s 71 of the Trustee Act was also sought to vest in the new trustees all of the property held subject to the Trust. 2. The second defendant in these proceedings is Ms Linda Jenkins (Mr Aspinall's former de facto wife). Ms Jenkins and Mr Aspinall are the only two directors of the existing trustee. When the summons came before me for hearing Ms Jenkins made an application for the proceedings in this Court to be cross-vested to the Family Court of Australia Sydney Registry to be consolidated with proceedings number SYC 3079/2016 between, inter alios, Mr Aspinall and Ms Jenkins (invoking the jurisdiction under s 5(1) of the Jurisdiction of Courts (Cross Vesting) Act 1987 (NSW)). 3. The third to fifth defendants are the adult children of Mr Aspinall and Ms Jenkins. A conditional appearance has been filed on behalf of each of them in these proceedings. They are, as I understand it, parties in the Family Court proceedings. They were represented on the applications before me by their solicitor. 4. In essence, the dispute before me was as to whether to cross-vest the proceedings in this Court to the Family Court (as Ms Jenkins wished me to do) or to hear the application for the appointment of new trustees as trustees of the Trust (as Mr Aspinall sought). Ms Jenkins' opposition to the latter course was based on concerns as to the cost involved in such an appointment and that the ongoing business operated by Aqua Sports in its capacity as trustee of the Trust (which is described in the proceedings as a "typical" discretionary family trust), being a swim school at Terrey Hills presently managed by Ms Jenkins, might be the subject of decisions by the new trustees that would adversely affect, or cause the cessation of, the business (and hence would have an impact on the value of the assets available for distribution in the Family Court proceedings). The swim school is operated from a property owned by Mr Aspinall and Ms Jenkins as joint tenants. The property comprises three swimming pools, as well as sporting fields and buildings (affidavit of Mr Aspinall affirmed 20 April 2018, [9]-[12]). 5. In the event that his application was dismissed, or the proceedings transferred to the Family Court, Mr Aspinall sought a "notation" from the Court to the effect that he was acting reasonably in commencing proceedings to seek removal of the trustee (Mr Aspinall there referring to his concern as to potential third party claims that may arise in relation to the trust estate). The making of any such notation was opposed by the other parties. 6. After hearing the respective submissions, I declined to make the order sought for the cross-vesting of these proceedings to the Family Court and instead made orders for the appointment of the new trustees (Mr Blair Pleash and Ms Joanne Freeman), each of whom is a registered liquidator and chartered accountant and who are, respectively, a partner and employee of Hall Chadwick (a practice of accountants and insolvency practitioners), though I imposed some limitations on that appointment as I will explain in due course. I indicated that I would publish my reasons for those orders as soon as practicable. These are those reasons. Background 1. Aqua Sports was registered as a company on 19 June 1997, with Mr Aspinall and Ms Jenkins the two directors and sole shareholders of the company (holding equal shares in the company). An extract from the records of the Australian Securities and Investment Commission was in evidence (Exhibit A, pp 1-6). 2. On the same day, a trust was established in accordance with the terms of a trust deed dated 19 June 1997 executed by Australian Company Incorporation Services Pty Ltd as settlor (the Trust Deed) (Exhibit A, pp 11-36). Aqua Sports was appointed trustee of the Trust. The Trust Deed was subsequently amended by a Deed Poll executed by Aqua Sports on 21 October 2010 (Exhibit A, pp 37-58). 3. Under the Trust Deed, the objects of a power to appoint income (cl 3) and capital (cl 4) are determined by reference to the class of "Primary Beneficiaries" (as well as the "Secondary Beneficiaries" and "Tertiary Beneficiaries") (see cl 1.9 of the Trust Deed and the Schedule to the Trust Deed). The definition of "Primary Beneficiaries" includes not only Mr Aspinall, Ms Jenkins and their named children but also their "spouses, including spouses within a de facto relationship, and whether married or not at date hereof or prior to the Perpetuity Date" (Exhibit A, p 35). The class of beneficiaries would thus seemingly include Mr Aspinall's now spouse. 4. At all times since June 1997, Aqua Sports, as trustee for the Trust, has carried on a swim school business; now operating that swim school on part of the Terrey Hills property earlier referred to which is owned jointly by Mr Aspinall and Ms Jenkins (and which area is leased by Aqua Sports on a month to month lease) (see Mr Aspinall's affidavit at [10]-[13]). 5. Mr Aspinall and Ms Jenkins separated on a final basis in about October 2014. Family Court proceedings were commenced by Mr Aspinall on 18 May 2016 ([22] of his affidavit). Since then, the third to fifth defendants (the adult children of the couple) have been joined as parties to those proceedings on 19 September 2017 ([25] of Mr Aspinall's affidavit) and Aqua Sports was joined as a party to those proceedings on 27 October 2017 ([26] of Mr Aspinall's affidavit). As I understand it, the third to fifth defendants in the present proceedings have made allegations in the Family Court proceedings of breach of trust and have claimed entitlements to unpaid distributions of trust income (see [27] of Mr Aspinall's affidavit and Exhibit A at pp 118-132). 6. Mr Aspinall has deposed (see [16]-[17] of his affidavit) that he and Ms Jenkins have not been able to agree on resolutions in relation to distributions to beneficiaries for the years ending 30 June 2016 or 30 June 2017 or otherwise as directors of Aqua Sports; or to make joint decisions (see [47]-[49] of his affidavit). He has deposed that Aqua Sports has not passed any resolutions since 1 December 2015. As a result the management of the trustee company is effectively deadlocked. 7. Mr Aspinall has also deposed to his exclusion from the management of the business carried on by the trustee (at [34]-[46] of his affidavit). He says that from at least early 2017 he has been unable: to determine the accuracy of summary accounts of the trustee's financial situation; to inspect the property where the swim school is operated; to supervise the operation of the business; or to participate in the management of the business (see [46] of his affidavit). 8. Further, Mr Aspinall submits that there is now (as a result of the claims made by the third to fifth defendants in the Family Court proceedings) a clear conflict as between his position (and presumably that of Ms Jenkins) and Aqua Sports. Mr Aspinall notes that Aqua Sports has not (and he says at present it cannot) engage an independent lawyer to represent it in the Family Court proceedings (see [50]-[55] of his affidavit). This is said to be of significance because it cannot respond to the allegations which have now been made against it, in its capacity as trustee of the Trust, in those proceedings (see above at [11]). 9. Mr Aspinall has deposed to his concerns as to third party claims (see [30]-[33] of his affidavit) (being those of the third, fourth and fifth defendants, and also potentially of Mr Aspinall's wife) and as a consequence, his concerns as to the solvency of the trustee company (see [32] of his affidavit). In written submissions, Mr Aspinall noted in this regard his obligations as a director and the potential for personal liability imposed on directors of companies trading while insolvent trading as well as the need for compliance with pay-as-you-go taxation obligations and superannuation entitlements. 10. Ms Jenkins has responded, in an affidavit sworn by her on 10 May 2018, to the matters raised in Mr Aspinall's affidavit. In her affidavit (parts of which were read simply as assertions by her, in the absence of evidence as to the basis on which she had expressed conclusions about those matters), Ms Jenkins has deposed that it was agreed between she and Mr Aspinall that she was the managing director of the swim school (see [42]) and has deposed as to remedial works undertaken to the swim school property (see [55]-[56]) by way of maintenance of the swim school business and facilities. 11. Ms Jenkins has deposed that she is in a precarious financial position as Mr Aspinall "has not 'signed off'" on the minute of meetings for her to receive any remuneration for her daily work at the swim school (see [60] of Ms Jenkins' affidavit) and she has expressed her concerns that if a new trustee is appointed her ability to retain the swim school and the real property as part of any property settlement will be defeated and her claim in the Family Court rendered nugatory (see [65]). Ms Jenkins has deposed that, in the Family Court proceedings, orders were made by Senior Registrar Campbell in April 2018 for the appointment of an expert witness to report on the condition of the swim school premises and on the need for any repairs or maintenance (see [70]-[71]). Power to remove trustees 1. This Court has both the inherent jurisdiction and the power under s 70 of the Trustee Act to remove trustees. In the exercise of that power, it has been said that the dominant consideration is the welfare of the beneficiaries – see Miller v Cameron (1936) 54 CLR 572; [1936] HCA 13 where Starke J at 579, citing Letterstedt v Broers (1884) 9 App Cas 371 at 386 per Lord Blackburn, said: No general rule can be laid down for the removal of trustees from their office. The only guide is the welfare of the beneficiaries, and a trustee may be removed if the Court is satisfied that his continuance in office would be detrimental to their interests. 1. In Miller v Cameron Dixon J, as his Honour then was, said at 580 that: The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. 1. In Application of Uncle's Joint Pty Ltd [2014] NSWSC 321 what was sought was not an order for removal of trustees, as such, but judicial advice as to whether trustees ought to defend proceedings challenging their own appointments. Brereton J noted (at [30]): The interests of the trust as a whole are not significantly affected by the identity of the trustee, although the separate interests of various of the beneficiaries may be affected. The trustee has, or should have, no particular interest in being trustee. In this case (unlike a removal suit) the trustee's conduct is not impugned, so it does not have even the interest that a trustee whose conduct is impugned has in resisting allegations of impropriety made against it. 1. Submissions as to removal of Aqua Sports as trusteeMr Aspinall submitted that it was appropriate for the protection of the trust estate, the execution of the trust, and the welfare of the beneficiaries that Aqua Sports (a company which is effectively deadlocked due to the inability of the directors to reach agreement) be removed forthwith from its position as trustee of the Trust. 2. In essence, what was submitted was that the trustee carries on an active and inherently risky business (not only a swim school but also the provision of other sporting and fitness facilities) and is not a "mere passive investment vehicle"; that there were issues of public safety involved; and that the public interest (and protection of the pubic) outweighed any argument that the assets should be controlled by any particular "party to a marriage". It was submitted that the decision (at the time of June 1997, it is to be assumed) to operate the business as part of the trust estate involved an election to subject the trust estate to the supervisory jurisdiction of the Equity Division of this Court. 3. Emphasis was placed on the position of deadlock as between the directors of the trustee company (as adverted to above) (see [34]-[46] and [47]-[49] of Mr Aspinall's affidavit); concerns being raised by Mr Aspinall as to: potential exposure with respect to third parties (such as creditors and clients of the swimming school business); questions concerning the repairs and maintenance and capital works of improvements relating to the swimming school business ([49(d)] of his affidavit); and as to the position in relation to debt financing (see [49(e)] of his affidavit). Reference was made to correspondence between the two directors as to matters concerning the operation of the business (as exhibited to Mr Aspinall's affidavit). 4. Mr Aspinall submitted that, on Ms Jenkins' own representations, the trust property is in a state of disrepair; parts of the trust property are in a very dangerous state of repair, which must be attended to on an urgent basis; and there is an imminent risk to the public. It was submitted that there was no evidence of the trustee's compliance with statutory obligations or as to appropriate insurance being in place (or as to how any insurance could have been in place having regard to the lack of directors' resolutions since late 2015). Mr Aspinall submitted that it is appropriate that persons who are disinterested, appropriately qualified and experienced be appointed as trustees so as to consider the management and administration of the trust estate (including the trust property). 5. Further, given the provisions under the Trust Deed as to the holding of income for the benefit of the Primary Beneficiaries in default of appointment or accumulation prior to the relevant date in a particular year (see cl 3.2), it was submitted that the proper management and administration of the trust are matters that concern not only the parties to the marriage but others (such as Mr Aspinall's present spouse) who fall within the definition of "Primary Beneficiary" in the Trust Deed. The present position is that there has been no appointment of income in respect of the years ending 30 June 2016 or 30 June 2017. Mr Aspinall refers to Stein v Sybmore [2006] NSWSC 1004, where Campbell J (as his Honour then was) observed (at [25]) that "[w]here there is a power to appoint property amongst members of a class, and a gift over in default of appointment, the takers in default have a vested, but defeasible, interest in the property". Mr Aspinall submits that takes this matter beyond the scope of a matrimonial dispute per se. 6. In this regard, it was submitted that it was in the best interests of the beneficiaries of the trust estate (including any for whom property rights have arisen as a result of deadlock) for independent and impartial trustees to be appointed. 7. For Ms Jenkins, it was submitted that orders to address the expressed public safety concerns were not necessary as that matter had already been dealt with by Ms Jenkins and/or was already the subject of orders made by the Family Court (although the orders to which I was taken did not address the making of decisions by the trustee company itself). It was submitted that the Family Court could make orders in personam requiring the directors to take particular steps to address the deadlock issue. It was submitted that the appointment of independent trustees would be at extraordinary cost and that this was not in the interests of the beneficiaries. Submissions as to cross-vesting application 1. As to the application by Ms Jenkins for the matter to be cross-vested to the Family Court, reliance was placed by Mr Aspinall on what was said by Brereton J, in Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440 (at [19]) as to the three relevant considerations identified by s 5(1)(b)(ii) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW); those being: whether (but for cross-vesting and accrued jurisdiction) the relevant proceeding would have been incapable of being instituted in the Supreme Court and capable of being instituted in the Family Court; the extent to which the matters for determination in the relevant proceeding arise under a law of the Commonwealth and are not otherwise (apart from cross-vesting legislation) within the jurisdiction of the Supreme Court; and the interests of justice. 2. Mr Aspinall submitted that the present proceedings (for removal of a trustee), brought pursuant to s 70 of the Trustee Act, are clearly within the scope of this Court's jurisdiction and that, putting aside any accrued jurisdiction or cross-vesting, the proceedings could not have been instituted in the Family Court (see s 5(9) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW), which provides that nothing in s 5 confers on a court jurisdiction that the court would not otherwise have). For Mr Aspinall, it was submitted that it was seriously arguable that the Family Court does not have jurisdiction to deal with the identity of a trustee of a trust estate (that question concerning the management and administration of a trust, as opposed to the entitlements to trust property) and in those circumstances it would be more appropriate that the matter be dealt with in this Court (where no question as to jurisdiction arises), rather than to have the matter transferred only for it to be found by the Family Court that jurisdiction is lacking and for the matter then to be returned to this Court (referring to Benlair Pty Ltd v Terrigal Grosvenor Lodge Pty Ltd [2006] NSWSC 339; Valceski at [20]-[22]; and Paris King Investments Pty Ltd v Rayhill [2006] NSWSC 403). 3. Reference was made to Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 294; [1983] HCA 36 where Mason J (as his Honour then was), Brennan J (as his Honour then was) and Deane J set out the following paragraph from the judgment of Mason, Murphy, Brennan and Deane JJ in Fencott v Muller (1983) 152 CLR 570 at 608; [1983] HCA 12 as to the scope of accrued jurisdiction: What is and what is not part of the one controversy depends on what the parties have done, the relationships between or among them and the laws which attach rights or liabilities to their conduct and relationships. The scope of a controversy which constitutes a matter is not ascertained merely by reference to the proceedings which a party may institute, but may be illuminated by the conduct of those proceedings and especially by the pleadings in which the issues in controversy are defined and the claims for relief are set out. But in the end, it is a matter of impression and of practical judgement whether a non-federal claim and a federal claim joined in a proceeding are within the scope of one controversy and thus within the ambit of a matter. 1. It was submitted that the matter might be further complicated by the discretion the Family Court holds to refuse to exercise accrued jurisdiction (noting that it will be relevant to the exercise of that discretion whether the claims are "attached" and not "severable" from or "disparate" to the main claim). 2. It was further submitted that even if the Family Court does have jurisdiction to deal with such an application, there is a serious question as to whether the parties to the Family Court proceedings could approach that Court seeking interim relief (referring to the Family Law Rules 2004 (Cth), r 5.01). It was submitted that the current case before the Family Court (for the determination of the property interests of Mr Aspinall, Ms Jenkins and their children) does not extend to the management of trust property for the benefit of other Primary Beneficiaries, "the character of which may be bare trusts formed as a result of a present entitlement to Trust Income". Mr Aspinall submitted that, insofar as the case of the children in the Family Court is that Aqua Sports holds property on trust in a discretionary trust and a series of other bare trusts, the same must be the case for Mr Aspinall's current spouse who is not a party to the Family Court proceedings and not related to the marital cause before the Family Court. 3. Reliance was placed on the principles mandated by s 56 of the Civil Procedure Act 2005 (NSW). Mr Aspinall referred in his affidavit (at [29]) to advice received from his solicitors that there was no real possibility that the Family Court proceedings would be heard this year. Pausing there, although objection was taken to the evidence sought to be adduced from Mr Aspinall's solicitor (Mr Rhys Wilkie) (on the basis that he was not and could not be put forward as an expert witness) as to the likely timeframe within which an interlocutory application in the Family Court would be given a first return date and as to priority being given in that Court to parental matters, Ms Jenkins' Counsel accepted that it was not likely that a final hearing in the Family Court proceedings would take place this year (the estimate being late 2019 or 2020) (though he pointed to the making of interim orders in those proceedings only recently). 4. As to the "interests of justice", the relevant considerations were explained by Brereton J at [69] in Valceski as follows: That [leads] to the third factor, the interests of justice. The question is simply whether, assuming that the jurisdiction of the transferor court has been regularly invoked, it is in the interests of justice that the proceedings be heard and determined in the transferee court, there being a statutory obligation to transfer the proceedings to that court whenever it appears to be in the interests of justice to do so – for which purpose it is both necessary and sufficient that the transferee court be the "more appropriate" forum. 1. Mr Aspinall pointed to the following matters, which he argued indicated that it was in the interests of justice that the discrete issue as to the change in trusteeship be heard now in this Court. Those matters largely related to the nature of this application being the removal of a trustee: including, that the Family Court proceedings and these proceedings do not share a common or identical substratum of facts (it being submitted that the management and administration of the trust property is a discrete issue and will probably not be ventilated in the Family Court); that the Family Court may not deal with the trusteeship issue, but simply with entitlements to the trust property; that the "natural forum" for a change in trusteeship is this Court; and that the factual matrix of the matrimonial proceedings, on the one hand, and these proceedings, on the other, will not overlap. As adverted to already, it was submitted that the existence of a potential argument that the Family Court does not have jurisdiction in matters involving the identity of a trustee makes this Court a more appropriate forum. 2. Further, it was submitted that the present proceedings "fall comfortably within the ambit" of the Equity Division of this Court and outside the specialist jurisdiction of the Family Court (a reference to what was said by Hidden J in Murray Morgan Investments v Capma Pty Ltd [2016] NSWSC 264 at [15]); that, having regard to the narrow issues, the matter was likely to be able to be determined immediately and expediently in this Court, and with very little (if any) duplication of evidence or issues; and that the nature of the concerns raised by Mr Aspinall made it necessary for the matter to be dealt with quickly. 3. In oral submissions made for Ms Jenkins, it was argued that the Family Court has jurisdiction to deal with the matter (referring to Re Wakim; ex parte McNally (1999) 198 CLR 511; [1999] HCA 27 and Warby v Warby [2001] FamCA 1469; (2001) 166 FLR 319). It was argued that there is here a single justiciable controversy (namely the value of the trust and how the trust assets should be distributed and to whom); that the concerns raised as to public safety issues had already been addressed; that it would be premature to appoint new trustees to what is a typical discretionary family trust; and that the Family Court is in a position to make in personam orders against the directors requiring them as directors to attend to certain things in order to overcome the problem arising as a result of the deadlock between directors. As noted earlier, reference was made to the Family Court's recent orders for a single expert to address questions as to issue of public safety of the premises. (As, unfortunately, I still do not have the benefit of transcript and as there were no written submissions for Ms Jenkins, it may be that I have not precisely captured the submissions made at the hearing of this application but I am confident that I have captured the thrust of those submissions based on my notes of the submissions.) 4. Ms Jenkins, in her affidavit (parts of which I read simply as submissions) deposed to her belief that Mr Aspinall was attempting to litigate this matter in this Court so as to cause her financial distress (see [65] of her affidavit) and as to her belief that the proceedings are an abuse of process and have been instituted to cause her stress and significant financial hardship "by litigating matters regarding out [sic] property settlement in different jurisdictions" (see [60] of her affidavit). 5. The solicitor for the third to fifth defendants did not take any position in relation to the cross-vesting application or the application for removal of the trustee, but did submit that it was not appropriate at this point to make any order absolving the trustee (or Mr Aspinall) from any previous conduct in breach of trust (nor to make orders in relation to any prospective breach). Further, the solicitor for the third to fifth defendants was concerned to ensure, first, that no order be made that would trespass upon the jurisdiction of the Family Court, where (I was told) there is currently an application pending before the Court to restrain the parties from dealing with the trust assets (which is listed for directions next month); and second, that there should be no question of an issue estoppel arising from any decision in this Court to remove the existing trustee. Determination of cross-vesting application 1. I did not consider it to be appropriate to make an order cross-vesting these proceedings to the Family Court. 2. In Austec Wagga Wagga Pty Limited v Rarebreed Wagga Pty Limited [2012] NSWSC 343, Stevenson J considered a similar application brought in this Court in the context where there were Family Court proceedings also on foot. There, his Honour determined that the question of the identity of the trustee was a discrete issue that could be disposed of by this Court in a quick and efficient manner. 3. In Austec the matter for determination was who, or what entity, ought thenceforth be the trustee of a discretionary family trust established by a Deed of Settlement in circumstances where there was a dispute between ex-husband and wife as to the identity of the trustee. 4. What was in dispute (see [48] of the judgment) was whether the purported appointment, by the ex-husband, of a company as trustee of the trust was ultra vires the power of appointment, or a fraud on the power of appointment; if so, whether the Court should exercise its power under s 70 of the Trustee Act to appoint that company or one of two named persons as trustee of the trust; and whether a receiver of the assets of the trust should be appointed. The ex-wife's proceedings in the Family Court remained on foot, pending determination of the proceedings in this Court. 5. Stevenson J concluded that the husband's purported appointment of the company as trustee was not a step taken by the husband to promote the objects of the trust: rather, it was a step taken to ensure that he achieved control of the trust and thus the business operated by the trust (at [70]). His Honour concluded that the purported appointment was of no effect. 6. The trustee company which had been sought to be removed by the purported appointment of a new trustee was in liquidation. Stevenson J concluded that the interests of the trust would be best served if the trustee were not a company in liquidation ([98]) and if an independent professional person were to be appointed trustee ([99]). 7. The case is relied upon by Mr Aspinall only as an example of where this Court has entertained an application of the present kind notwithstanding that there were pending proceedings in the Family Court. 8. In Valceski, an estranged wife had instituted proceedings for a settlement of property under the Family Law Act 1975 (Cth), s 79. The husband had become the sole registered proprietor of the former matrimonial home following a transfer of his father's share in the property under a deed and the father had brought proceedings in this Court to set aside the deed and transfer and for declarations as to the equitable interests in the property. The wife then sought a declaration in the Family Court that her husband's family had no interest in the property, and applied to this Court for a transfer of the Equity Division suit to the Family Court. 9. After setting out the relevant considerations stipulated by s 5(1)(b)(ii) (to which I have already adverted), at [20], Brereton J said: However, because of s 5(9), and as Re Wakim; Ex Parte McNally (1999) 198 CLR 511 held constitutionally invalid the former provisions that purported to confer on the Federal and Family Courts jurisdiction in State matters, it is a pre-requisite to a transfer order that the transferee court have jurisdiction in respect of the relevant matter. It will not be more appropriate that the relevant proceeding be determined by the proposed transferee court if it does not have jurisdiction to do so. 1. At [21], his Honour noted that: … it may well not be more appropriate that the relevant proceeding be determined by the proposed transferee court if it is seriously arguable that it does not have jurisdiction to do so, when the transferor court undoubtedly has jurisdiction. 1. His Honour there referred to Benlair Pty Ltd v Terrigal Grosvenor Lodge Pty Ltd and to Paris King Investments Pty Ltd v Rayhill. 2. In Warby v Warby, the Full Court of the Family Court (Nicholson CJ, Finn and Strickland JJ) considered, upon a case stated, the extent of the accrued jurisdiction of the Family Court. As summarised by Brereton J in Valceski (at [50]), the Full Court held: • That the Family Court's jurisdiction is not restricted to the determination of the family law claim but (by way of accrued jurisdiction) extends beyond to the whole litigious and justiciable controversy of which the family law claim forms part – including those parts of it that arise under or are governed by State law, common law or equity, and whether between the parties to a marriage or between a spouse (or spouses) and a third party. • That relevant to whether the Family Court would exercise the Court's accrued jurisdiction were what the parties had done, the relationships between or among them, the laws which attach rights or liabilities to their conduct and relationships, whether the claims are part of a single justiciable question (and in determining that question, whether the claims are "attached" and not "severable" or "disparate"), whether the claims are non-severable from a matrimonial cause and arise out of a common substratum of facts, and whether the court has the power to grant appropriate remedies in respect of the "attached" claims. • The accrued jurisdiction extends to the determination of an issue against a third party which refuses to take part in the proceedings, if it has proper notice and has been afforded a proper opportunity to be heard. 1. I do not consider it necessary in these reasons to embark upon a debate as to the accrued jurisdiction of the Family Court or the likelihood or otherwise that the Family Court would accept that it has jurisdiction in this matter and/or decline in the exercise of its discretion to exercise that jurisdiction to consider the removal of the trustee in the present case. 2. I accept for present purposes that it cannot be said not to be seriously arguable that the Family Court would have jurisdiction in the present proceedings. Nonetheless the determinative factor here seems to be that the jurisdiction invoked by Mr Aspinall falls clearly within the jurisdiction exercised by this Division of the Court and it is in the interests of justice here to exercise it. 3. I accept the submission of Mr Aspinall that the present proceedings involve a discrete issue: not being concerned with the entitlements, or division of, the trust fund but rather with addressing a situation where the administration of the trust and the performance of the trustee's duties as trustee are at present hindered by a position of deadlock due to the inability of Mr Aspinall and Ms Jenkins as directors of the trustee to agree on matters relating to the trust. That is an issue that can be determined expeditiously in this Court and without the need for one or more applications to the Family Court on an interlocutory basis to direct the directors to take particular steps in the administration of the trustee company (which seems to be what was contemplated by Ms Jenkins' submissions). Determination of application for order for removal of trustee 1. As noted earlier, the "main guide" when considering the removal of trustees is the welfare of the beneficiaries. The trustee company is currently deadlocked and there are duties that the trustee is required to perform (in particular to administer the trust estate by making appointments of income and capital, and in so doing to consider the objects of the power to appoint) which the trustee company has been unable to perform in the past two years and which it is unlikely to be able to perform while its directors are unable to reach agreement between themselves as to matters relevant to the duties of the trustee. In these circumstances (and where breach of those duties is already the subject of complaint by the third to fifth defendants in the Family Court proceedings and may well be the subject of dispute by other beneficiaries) I was of the view that it was more appropriate to determine the issue as to the identity of the trustees in this Court on the application that was before me – that being able to take place quickly and expeditiously. Concerns as to the financial position of the trustee company are also highly relevant in this regard, bearing in mind the potential liability of the directors to third parties or creditors if the position is as Mr Aspinall fears it to be. In this regard, I note that deadlock between directors has been recognised as a matter which may provide a basis for the making of a court order winding up the company (see, for example, Khamo v XL Cleaning Services Pty Ltd [2004] NSWSC 1134 at [26]-[27] (per Barrett J, as his Honour then was); Giacobbe v Giacobbe [2012] VSC 285 at [14] (per Ferguson J, as her Honour then was)). This highlights the seriousness of the current situation. 2. I accept that the appointment of independent trustees will be at a cost and that in the case of a family trust of this kind it is unfortunate that such costs may deplete the assets of the trust. That said, I cannot accept that it is in the interest of beneficiaries for Aqua Sports to remain trustee in circumstances where it is unable to perform its duties as trustee because of a deadlock between the directors. The obvious conflict between the position of the trustee and its directors in contesting issues of breach of trustee's duties (such as the duty to consider the appointment of income and capital) (particularly in light of the claims that have already been made) highlights the necessity for the appointment of independent trustees. 3. Having debated this issue with the parties' legal representatives in the course of the hearing of the respective applications, and conscious of the concern by Ms Jenkins that her position in the Family Court proceedings not be prejudiced by decisions made (for example, to cease the operation of the swim school or to terminate her employment or that of her staff) and the concerns expressed by the third to fifth defendants as to their pending application in the Family Court proceedings, I invited the parties' legal representatives to formulate conditions that might be placed on the incoming trustees to require, in effect, that contentious decisions be the subject of an order from the Family Court unless made with the written consent of Mr Aspinall, Ms Jenkins and their children (the parties to both the present proceedings and those in the Family Court). 4. After debate as to opposing formulations of such conditions, I made orders intended to address the present deadlock but to preserve arguments as to the trust property and entitlements of the beneficiaries of the trust to be dealt with in the context of the Family Court proceedings (this being at heart a dispute between the warring former de facto spouses and their children) by the specialist court in which such disputes are appropriately to be heard. 5. As to costs, I considered that Mr Aspinall should have his costs out of the trust property on the ordinary basis. This was a discrete application and Mr Aspinall was successful in obtaining the relief that he sought. I was not persuaded that the bringing of the application was an abuse of process; nor was I persuaded that the conduct of the application was unreasonable. The replacement of the trustee was something that was obviously required in order to address the deadlock at the level of the directors of the trustee company. I did not, however, accede to the application that costs be on the indemnity basis. 6. For the above reasons, I made the following orders: 1. Order pursuant to s 70 of the Trustee Act 1925 (NSW) (Trustee Act) that: 1. Blair Pleash of Level 40, 2 Park Street, Sydney in the State of New South Wales, chartered accountant and registered liquidator; and 2. Joanne Freeman, of Level 40, 2 Park Street, Sydney in the State of New South Wales, chartered accountant and registered liquidator (collectively "the New Trustees") be appointed trustees of the trust known as the "Aspinall Trust", the terms of which are contained in a deed of trust dated 19 June 1997 and as amended by a deed poll dated 21 October 2010 (Trust), in substitution for Aqua Sports Pty Ltd (ACN 078 971 945). 1. Order pursuant to s 71 of the Trustee Act that all of the property held subject to the Trust be vested in the New Trustees. 2. Direct that, subject to any orders that may be made in the Family Court of Australia in proceedings No. SYC 3079/2016, the New Trustees not take any step to cease or cause the cessation of the operation of the swim school business presently carried on by the first defendant or to terminate the employment of the second defendant or any other current employee of the swim school business without: 1. the written consent of each of the plaintiff and second to fifth defendants or 2. in accordance with an order of the Family Court of Australia. 1. Balance of the summons be otherwise dismissed. 2. Order that the plaintiff's costs of these proceedings be paid out of the property held subject to the trust on the ordinary basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 May 2018